Social Innovation: Is the UK’s Government Solar Tariff a Threat to its Solar Industry?

The British government’s ambitious social innovation announcement this February seems to be a double-edged sword. It has plans to ensure that “nearly 4m homes across the UK will be powered by the sun within eight years.” Yet ironically, it comes on the back of a cut in the subsidies available for solar energy generation, which takes effect from April 2012. This will reduce the amount of money households with solar panels will receive. The government defends the cuts saying it was necessary because the costs of solar panels have fallen in recent months.

British households fitting solar panels will now receive 21p (0.33 cents) for every kilowatt/hour of energy they generate; it is down from 43p (0.68 cents). This will reduce the annual return from investing in solar panels from around 7 per cent to 4 per cent. It will increase the time it takes to pay off the £10,000 ($15, 827) to £12,000 ($28, 490) upfront investment from 10 to 18 years. Households wishing to receive solar subsidies will also have to improve their homes under the new rules for energy efficiency.

The government highlights new research showing that the cost of solar panels has dropped by 45% since 2009, far quicker than forecasted. The government predicts that in spite of these tariff cuts there will still be at least 625,000 households that will install social innovation solar panels by 2015 and that by 2020, the amount of solar power installed in the UK will amount to 22GW, which is as much energy that is produced by more than ten large modern power stations.

Howard Johns, head of the Solar Trade Association says, "The government's cut will be utterly devastating for the UK solar sector. The hard facts are that a cut on this scale will leave the solar industry dead in a ditch, destroying tens of thousands of jobs and cutting off a green, social innovation hi-tech British industry just as it starts to flourish. Ministers claim to want a renewable future, but are destroying the very businesses that can make that future happen. This whole proposal has been rushed and chaotic, and while ministers try to force it through arbitrarily, hard-working people are losing their livelihoods. What was a real British success story is on the verge of being consigned to the dustbin."

It seems the social innovation energy Britain could generate from the sun has been overshadowed by the promise of shale gas. The discovery in September 2011 that shale gas reserves in the UK’s area of Blackpool is far greater than previously estimated. It has made fossil fuel an increasingly viable and attractive alternative to renewable energy. As a compromise, Howard Johns wants to persuade the government to rethink its cut to households who fit solar panels and instead reduce it by just a quarter to 32p instead.

Photo Credit: Images_of_Money

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